Chris Drayton
18 May 2016

Must Outgoings be payable to a third party to be recoverable?

Chris Drayton


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Charities and Not-For-Profits

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Following on from our recent post as to whether certain outgoings were recoverable under a commercial lease, the Supreme Court of New South Wales in the recent decision of Ekera Medical Pty Ltd v Revesby Workers Club Ltd has had cause to consider a different question relating to outgoings recovery.

In the circumstance of this case, the plaintiff tenant was obliged to pay outgoings under the lease. The definition of outgoings contained in the lease was reasonably typical of such definitions and it was accepted for the purpose of the matter that to be outgoings the costs and expenses must be incurred by the landlord.

The claim made by the plaintiff tenant was that in order to constitute “Outgoings” the costs and expenses in question must have been paid or be payable by the landlord to a third party.

This submission was rejected by the Court and it was noted that what is required, is that the costs and expenses “relate to the Centre”. The costs and expenses may well be incurred by the landlord otherwise than by payment out to a third party. 

The decision is particularly relevant for landlords that carry out management services in-house. The decision also provides confirmation that in order to be recoverable under a typical outgoings provision, management costs are not required to be payable by the landlord to a third party.

Please do not hesitate to contact us if you have any queries about outgoings provisions and what may or may not be recoverable under them.

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